Geothermal: A Steadily Growing Power Sector

When people converse about a low carbon future powered by clean energy, they often forgot one crucial renewable resource: geothermal. Maybe geothermal power is missed since it is one of the most difficult to understand. Anyone can imagine a sunny day or a rushing river. However, extracting heat from the Earth, a kilometer below the surface, to generate steam is a little more abstract. Although anyone who lives west of the Rocky Mountains may be surprised to learn some of the electrons powering the lights in their home came from a geothermal power plant. In 2016, these plants generated 50,000 MWh per day for the western states according to Energy Information Administration (EIA).

While expensive to build, generally if a utility or independent power producer can find the capital to build a geothermal power plant they are a great bargain. These plants operate at extremely high capacity factors, require little maintenance, and generate power reliably for decades if managed well. Some geothermal fields in California have generated power since the early 60s, while other fields in Italy have generated electricity since the 1920s or 30s only to be interrupted by American bombing campaigns during WWII. EIA wrote in 2015, “Geothermal cost data is site-specific, and the relatively large positive value for that technology results because there may be individual sites that are very cost competitive, leading to new builds, but there is a limited amount of capacity available at that cost.”

In this quote, EIA accurately describes the geothermal’s struggle to grow at a pace like wind or solar since the start of the clean energy revolution. While the sun shines everywhere, and the wind blows most places, geothermal has a more limited set of locations where the technology can be built cost competitively. Knowing this to be true, what does the future hold for geothermal technology?

In EIA‘s reference case scenario, geothermal power could add an additional 800 MWs of generating capacity by 2022. While some may interpret this slow growth as a weakness, under the right circumstances it can also be a strength. Geothermal is more immune to the booms and busts of other energy technologies. When a developer can line up property rights, financing, a power purchase agreement, and prove resource, it’s almost always certain a project will reach completion. Taking a closer look at EIA’s geothermal forecasts this immunity becomes more apparent. In all of EIA’s forecast scenarios, the geothermal power sector doubles in size to about 5 GW of net summer capacity by the late 2020s. In each, geothermal power continues to grow despite uncertain oil prices, under or over supplied fossil fuel markets, and strong or weak economic growth.

While the future of energy policy in the U.S. is somewhat uncertain, geothermal power seems set to grow. Since projects can take up 7 years to complete, developers will often say it’s important to look at the long-term industry trends. In this case, the long-term trends seem to suggest assuming steady growth for the geothermal sector is a good bet.